Back in the presidential campaign, candidate Donald Trump promised to eliminate the national debt in eight years. This goal was never plausible, even before Congress passed a tax cut that is expected to reduce federal revenues by more than $1 trillion over the next decade and before it agreed to $288 billion of new spending over just the next two years. Now, a new report by the Congressional Budget Office shows just how deep a fiscal hole we have dug, and gives some idea about what it would take to crawl out of it.
CBO figures that getting the debt down to its 50-year average in 15 years—nearly twice the time Trump promised-- would require Congress to enact $830 billion in spending cuts and tax increases in 2019 alone, or about $2,500 per person. That’s $10,000 for a family of four. And lawmakers would have to approve even bigger dollar amounts of spending cuts and tax increases in each of the following years. Anybody know a politician willing to campaign on that platform?
CBO looked at what it would take to meet three fiscal targets: Reducing the ratio of the federal debt to Gross Domestic Product (GDP) to the 50-year historical average of 41 percent, restoring the ratio—now scheduled to grow significantly—to the current level of 78 percent, or allowing it to rise to 100 percent of GDP and freezing it at that level. Then CBO looked at what it would take to reach each of those targets in 2033, 2038, 2043, and 2048.
If a 15-year time frame is out of reach, what about more conservative goals? What if, say, Congress took 30 years to return to the 41 percent debt/GDP ratio? If done in equal annual amounts, it would require tax hikes and spending cuts of about 3 percent of GDP. In 2019 alone, that would equal $630 billion--a per- person hit of $1,900.
Still too tough? Let’s assume that, given the expected costs of supporting an aging population, Congress is satisfied with bending the debt curve more modestly and bringing the debt to GDP/ ratio down to the current level of 78 percent in 15 years. In 2019, Congress would have to raise taxes and/or cut spending by $340 billion, or about $1,000 per person. And, of course, it would have to continue to make such cuts year after year. In 2033, tax hikes and spending cuts would total $430 billion or $1,200 per person (in 2019 dollars).
Remember the great line from the 1970s movie Jaws: “You're gonna need a bigger boat!” Well, to get out of this fiscal hole, it looks like we’re gonna need a bigger shovel.